Ethereum has faced significant challenges recently, marked by a notable decline in its value. This downturn has been influenced by various bearish indicators and external events that have created a negative atmosphere in the market.
Market Overview
Since reaching a peak of $4,107 in December 2024, Ethereum has experienced a 35% decline, hitting a low of $2,125 on February 3. Although it managed to recover and close above the crucial $2,500 support level, the market remains volatile. The breach of a cold wallet on the Bybit exchange, resulting in $1.5 billion in losses, has heightened bearish sentiment among investors.
The hack, attributed to the North Korean hacker group Lazarus, has raised significant concerns. Despite assurances from Bybit’s CEO regarding the exchange’s response to the incident and plans for an audited Proof-of-Reserves, the negative impact on Ethereum’s price movements complicates the outlook for traders and investors.
Technical Analysis
A technical analysis of Ethereum’s price action reveals a mixed scenario. The weekly chart indicates a bearish trend, with the price drop confirming a long-term ascending support trend line established since June 2022. Analysts have noted bearish divergences in the weekly Relative Strength Index (RSI) and Moving Average Convergence/Divergence (MACD), suggesting a potentially bleak long-term outlook.
Warnings have been issued about a possible breakdown below the trend line, which could see ETH prices fall to as low as $1,150. Conversely, the daily chart presents some hope for a bullish reversal, as the price decline has remained within a descending parallel channel, typically indicative of a corrective phase.
Short-Term Outlook
In the short term, selling pressure continues to be a concern. The six-hour chart shows a short-term ascending parallel channel during the recovery phase, but long upper wicks indicate ongoing selling pressure. Currently, ETH is trading in the lower part of this channel, raising concerns about a possible breakdown.
If support above the $2,500 level cannot be maintained, further sell-offs could occur, worsening the bearish sentiment that has emerged since the Bybit hack. The interaction between the weekly and daily indicators predominantly suggests a bearish outlook for Ethereum, although there are signs of potential recovery.
Market Sentiment and Future Implications
The repercussions of the Bybit hack have not only impacted Ethereum but have also affected the broader cryptocurrency market. Investor confidence has been shaken, leading to increased volatility and caution among traders. As the market grapples with the implications of this significant security breach, attention is likely to shift towards regulatory responses and the measures exchanges implement to enhance security.
Following the hack, discussions about the necessity for improved security protocols and transparency in the cryptocurrency sector have intensified. Investors are increasingly seeking assurances from exchanges regarding their security measures and asset integrity, which may result in a more cautious trading and investment approach in the short term.
As Ethereum navigates this challenging environment, the interplay of technical indicators, market sentiment, and external factors will be crucial in shaping its future. The coming weeks will be critical in determining whether ETH can regain its footing or if it will yield to the pressures of a bearish market.
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